More than five years since the onset of the global financial system, economic recovery remains fragile. I am here today to launch two new OECD reports – our biennial Regions at a Glance and another entitled Investing Together – that underscore the importance of zooming in closer on our nations’ regions and cities to tackle our most pressing challenges.

We are still preoccupied by unemployment figures, for example, and in particular by the increasingly high levels of youth unemployment. Here, Regions at a Glance 2013 reveals that a disproportionately large share of a country’s unemployment is typically found in a limited number of regions. In 10 OECD countries, more than 40% of the increase in unemployment in recent years was concentrated in just one region. Youth unemployment topped 50% or more in only a few regions of Spain, Italy and Greece.

The crisis has also exacerbated inequalities within countries.

The gap in GDP per capita between leading and lagging regions has increased in half of the OECD countries since 2008. This was the case especially in Denmark, Ireland and Slovak republic. Where regional disparities were reduced, this was due more to the decline of the richest regions rather than a catching up of the poorest regions.

Higher levels of regional income inequality reflect higher levels of inter-personal inequality. In the United States, Chile, the Slovak Republic, Israel, Australia, Poland, Spain and the United Kingdom, people in the top income region are more than 30% richer than the median citizen.

Regional inequalities go beyond GDP, affecting different outcomes that shape well-being, including education and health. Life expectancy in Mississippi for instance is 4 years less than for the average American, and in France, the share of workforce with only basic education in Corsica is almost 20 percentage points higher than in Brittany.

Many of our economic, social and environmental challenges are solvable by getting cities right! That’s why this year’s edition of Regions at Glance places a special focus on cities, and particularly on metropolitan areas. We know that their influence goes far beyond the city limits, and we need to measure that.

The OECD’s Metropolitan Database, which is publicly accessible, identifies “functional” areas. This new measure allows us to compare “apples to apples” and to produce more accurate international comparisons.

Our data also show us that metro areas tend to show higher productivity rates: the top ten contributed to one-third of OECD aggregate growth in the decade 2000-10.

With that said, not all metro areas are successful, and many are struggling with deindustrialisation and lack of competitiveness in what one could call “a common market of metropolitan economies”!

With the evidence in hand, how can we foster inclusive and sustainable recovery?

We can achieve it through better policies and better spending. OECD countries spent about USD 1.2 trillion last year in public investment. About three-fourths was carried out by regional and city governments. When used wisely, this represents one of the most growth-enhancing forms of public expenditure.

But, in order to avoid spending cuts on welfare, health and education, forced by the crisis, subnational governments’ chose to cut investment, which contracted by 13% since 2009. At the same time, private investment also contracted. Unfortunately, it looks as if fiscal constraints will remain for a while.

So how do to more with less?

The report Investing Together points to some solutions on how to spend smarter by Working Effectively Together across Levels of Government.

First, we need to co-ordinate across policy sectors at all levels of government. At best, we need to avoid working at cross-purposes. This not only wastes resources, it can actually make the situation worse. Ideally, spending across sectors should mutually reinforce each other to get “more bang for the buck”.

Investment in transport infrastructure, for example, needs to be integrated with national and regional economic development priorities to avoid a bridge to nowhere.

Second, we need greater co-ordination between national and subnational governments, which is no small feat. There are over 141 000 general purpose regional and local governments in the OECD. And in the United States alone, there are an additional 51 000 special purpose governments. We need better tools to help align investments across levels of government. Used in around half of OECD countries, contracts between national and sub-national governments have proved to be successful when they typically include a multi-year timeframe, integration across policy areas, and a reasonable administrative burden with indicators of accountability for performance.

Third, we need co-ordination across municipalities. Inter-municipal co-ordination, encouraged by almost half of OECD countries, can serve to achieve sufficient scale for investment, improve investment returns, avoid duplicative investments, and adapt investments to the needs of functional areas. This is not an easy task but one that can lead to successful outcomes as in Barcelona, London, or Vancouver. The OECD report on the Aix-Marseille metropolitan area, to be released later today, highlights how such better co-ordination could enhance its economic, social and environmental performance.

Finally, the quality of our regional and local governments can be reinforced through capacity-building efforts. Our report highlights 15 core capacities that can help improve the returns to public investment such as effective strategic planning, rigorous ex-ante appraisal, competitive procurement or sound monitoring systems. The Strong Cities, Strong Communities Initiative in the United States, for instance, brings together multiple federal entities who work directly with cities’ staffs to develop and implement their economic strategies, enabling them to cut through the red tape and to facilitate access to federal support.

Ladies and Gentlemen,

These two reports point out to some facts we simply can’t ignore. If governments at all levels work together to unleash the potential of cities and regions as engines of economic dynamism, they will greatly benefit national recovery and will create conditions for a better life. The OECD stands ready to continue to help you in such endeavour.Thank you.